09/02/09 Pittsburgh, Pennsylvania
I want to caution you on something… Lately, we’ve seen a solid correlation between the rising price of energy and related stocks. The better the economy looks, the more energy strengthens and the better things seem to get for energy plays. In August, the rising tide of oil prices lifted the share price boats for oil and oil service companies. That’s good, right?
Obviously, investors look at rising energy prices and believe that higher earnings will eventually follow in the energy patch. That’s the idea. And I too am very bullish on energy, for a lot of reasons. But my view tends to be to the far horizon.
In the short term — the rest of 2009 — we could still see severe swings in energy prices, especially related to general economic conditions. If the broad economy starts to slip into stagnation, or if it retreats in an economic swoon, the stock market party could be over in a New York minute.
If that happens, you should also expect to see lower energy and energy share prices. That’s my cautionary caveat.
Byron King
Byron King is the managing editor of Outstanding Investments and Energy & Scarcity Investor. He is a Harvard-trained geologist who has traveled to every U.S. state and territory and six of the seven continents. He has conducted site visits to mineral deposits in 26 countries and deep-water oil fields in five oceans. This provides him with a unique perspective on the myriad of investment opportunities in energy and mineral exploration. He has been interviewed by dozens of major print and broadcast media outlets including The Financial Times, The Guardian, The Washington Post, MSN Money, MarketWatch, Fox Business News, and PBS Newshour.
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